Keeping up to date with pension matters involves much more than simply ticking regulatory boxes.
Early 20th Century US President Woodrow Wilson famously observed that “Progressiveness means not standing still when everything else is moving.”
Many employers who pride themselves on being progressive should therefore ask themselves whether their pension arrangements have kept pace with the rapidly changing pensions landscape, and this does not simply mean complying with the letter of auto-enrolment law.
It is all too easy for senior management to pat each other on the backs and declare that it’s “job done” now that they have implemented the final legislative minimum contribution increases and dealt with – or put plans in place to deal with –re-enrolment.
But we’ve come across many companies mistakenly resting on their laurels when their pension scheme isn’t in fact compliant or is no longer suitable to their needs following changes in either the market or their business, or both.
One particularly significant trend has been a range of new pension providers entering the arena. This has created greater competition for pension schemes and therefore opportunities for money to be saved for both employer and employee.
For example, annual management charges were typically around 1% a few years ago. They reduced to 0.75% with the introduction of auto-enrolment and then again
to around 0.5%.
Switching to a provider offering lower annual management charges can generate considerable goodwill from scheme members.
Furthermore, if an employer has changed in size or in the age profile of its members since the introduction of auto-enrolment, we may well be able to use this to secure even more generous terms.
Even if charges are highly competitive, employers also need to ask whether the default fund and other investment options they offer remain appropriate.
The recent suspension of The Woodford Equity Income Fund, which has left thousands of savers unable to access their money for at least 28 days (and possibly for a lot longer), has served as a brutal reminder that even the supposedly surest bet can fail to deliver the returns expected.
The fund’s manager Neil Woodford had been one of the most successful fund managers of his generation. Anyone who invested £10,000 with him at the beginning of his quarter of a century career at Invesco Perpetual would have enjoyed seeing it grow to nearly £250,000 by the time he left to set up his own fund management business. (1*)
But, unfortunately, the results he has delivered as a solo entity have been highly disappointing, and investors had become so disillusioned that they were withdrawing money at a rate of £10 million a day, (1*)
The good news is that Chase de Vere offers a Workplace Pension Healthcheck to make sure your investment choices and overall pension strategy are delivering the outcomes you expect and providing optimum value for both you and your employees.
If you are paying a fee for your pension but are not sure whether you are getting value for money you could well benefit from this service. Similarly, if you are not using salary exchange to save National Insurance contributions for both employer and employee, you may well be missing a trick that we can put you right about.
Other questions you might want to ask yourself include whether the quality of your pension scheme is helping you to retain and recruit employees and whether you feel that employees are really valuing contributions that you are making on their behalf?
You may also wish to consider whether your scheme administration is running smoothly, your auto-enrolment scheme certificate is accurate and up-to-date and, if you are paying a fee for your auto enrolment software, whether the cost remains competitive?
Other issues to ponder include whether your pension scheme governance will ensure good member outcomes, whether the level of employer contributions you make compare favourably with those made by your competitors, whether your employees are satisfied with the retirement options currently being offered and whether they have access to an adviser to support them through the journey to
The value of investments and the income derived from them can fall as well as rise. You may not get back what you invest
The Financial Conduct Authority does not regulate some elements of Automatic Enrolment.